Kyrgyzstan cryptocurrency mining tax collection falls 50% YoY in 2024

Kyrgyzstan’s economy saw a significant decline from cryptocurrency mining tax despite the soaring crypto valuations of 2024.

Cryptocurrency mining tax contributed over 46.6 million Kyrgystani soms, or $535,000, to the country’s economy this year, according to a Dec. 25 budget document released by Kyrgyzstan’s Ministry of Economy and Finance.

However, this marks an over 50% decrease from the crypto mining tax collected in 2023, which amounted to 93.7 million soms, worth just over $1 million, according to local media reports.

*Kyrgyzstan state budget. Source: minfin.kg*

Kyrgyzstan’s crypto mining tax rate stands at 10% of the electricity fee used by crypto miners in the country, including value-added tax and sales tax.

The country is considered well-suited for cryptocurrency mining operations due to its abundant renewable energy resources, many of which are currently underutilized.

Over 30% of Kyrgyzstan’s total energy supply comes from hydroelectric power plants, but only 10% of the country’s hydropower has been developed so far, according to a report by the International Energy Agency.

Cointelegraph has approached Kyrgyzstan’s Ministry of Economy and Finance for comment.

Related: Confirmed Bitcoin payments hit yearly low due to holiday illiquidity

Bitcoin mining could stabilize renewable energy grids in the future

Bitcoin (BTC) mining may be deployed to stabilize the energy grid in the future, as renewable energy sources can often generate a surplus of electricity that can’t be stored.

Deutsche Telekom is already using surplus energy from renewable sources to fuel its Bitcoin mining operations.

The Bitcoin mining rigs will be set up in Backnang, Germany, on the premises of metal and glass facades manufacturer Riva, with the rigs managed by Metis Solutions, Deutsche Telekom announced on Nov. 11.

Deutsche Telekom’s pilot project arose from a growing amount of renewable energy sources, which would otherwise go to waste.

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The country’s growing energy supply from less predictable sources like wind turbines requires more infrastructure to regulate the grid, according to Oliver Nyderle, head of digital trust and Web3 infrastructure at Deutsche Telekom MMS.

Bitcoin mining could be used to regulate the energy fluctuations of the country’s electrical grid, Nyderle wrote in the announcement:

“Together with Bankhaus Metzler and RIVA Engineering GmbH, we are taking a step in this direction to test the regulatory effect of Bitcoin miners in the energy grid. Surplus energy is converted into digital values through the miners. We call this digital monetary photosynthesis.”

The use cases of Bitcoin mining extend far beyond its economic benefits for miners. In Finland, Bitcoin mining is warming an entire town of over 11,000 residents with recycled heat from the mining rigs.